BB Electronics A/S Ane Staunings Vej 21, 8700 Horsens CVR-nr. 21 66 25 34 Årsrapport 2017 Approved at the company s AGM on 22. marts 2018 Chair:...
Index Management s Statement of Responsibility 2 Independent Auditor s Statement 3 Management s review 6 Information about the company 6 Group structure 7 Primary figures and key performance indicators for the Group 8 Report 9 Financial statements and consolidated financial statements 1. januar 31. december 11 Statement of profit or loss Statement of financial position 11 12 Statement of movements in equity 14 Statement of cash flows 15 Notes 16 Accounting policies used 27 1
Management s Statement of Responsibility On this day, the Board of Directors and Executive Board have discussed and approved the Annual Report BB Electronics A/S for the financial year 1. January 31. December 2017. The Annual Report is presented in accordance with the Danish Financial Statements Act. We find that the financial statements and consolidated financial statements present a true and fair view of Group and company s assets, equity and liabilities and financial position as of 31. December 2017 as well as the profit or loss from the Group and company s activities and the Group s cash flows for the financial year 1. January 31. December 2017. We also find that the management s review presents a true and fair view of the development of the Group and company s activities and financial matters, the profit or loss for the year and the Group and company s financial position. The Annual Report is submitted for the AGM s approval. Horsens, dated 22. March 2018 Executive Board: Carsten Christensen Managing Director Board: Sven Ruder Chair Ole Steen Andersen Vice-Chair Per Thrane Folmer Rud Hansen Casper Lykke Pedersen Svend Lindbjerg Employee Representative Gert Højgaard Pedersen Employee Representative Malene Braskhøj Bust Pihl Employee Representative 2
Independent Auditor s Statement To the shareholders of BB Electronics A/S Conclusion We have audited the financial statements and consolidated financial statements for BB Electronics A/S for the financial year 1. January 31. December 2017, including the statement of profit or loss, statement of financial position, statement of movements in equity and notes, as well as the accounting policies for the Group and the company, and the statement of cash flows for the Group. The financial statements and consolidated financial statements are prepared in accordance with the Danish Financial Statements Act. It is our view that the financial statements and consolidated financial statements present a true and fair view of the Group and company s assets, equity and liabilities and financial position as of 31. December 2017, as well as profit or loss from the Group and company s activities and Group cash flows for the financial year 1. January 31. December 2017 in accordance with the Danish Financial Statements Act. Basis for conclusion We have performed our audit in accordance with international auditing standards and the additional requirements applicable in Denmark. Our responsibilities according to these standards and requirements are detailed in the section of the auditor s report The auditors responsibility for auditing the financial statements and consolidated financial statements (hereinafter the financial statements ). It is our view that the acquired audit evidence is sufficient and suitable as a basis for our conclusion. Independence We are independent of the Group in accordance with the international code of ethics for auditors (the IESBA Code of Ethics) and the additional requirements that are applicable in Denmark, and we have fulfilled our other ethical obligations according to these rules and requirements. The management s responsibility for the financial statements The management is responsible for the preparation of financial statements and consolidated financial statements that present a true and fair view in accordance with the Danish Financial Statements Act. The management is also responsible for the internal controls that the management deems necessary in order to prepare financial statements without material misstatements, whether due to fraud or error. In the preparation of financial statements, the management is responsible for assessing the Group and the company s ability to continue operations, providing relevant information on aspects concerning the continuation of operations and for preparing the financial statements based on the going concern principle, unless management intends to liquidate the Group or company, cease operations or has no realistic alternative but to do this. The auditor s responsibilities for the auditing of the financial statements Our objective is to obtain a high degree of security that the financial statements as a whole do not contain material misstatements, whether due to fraud or error, and to issue an auditor s report with a conclusion. A high degree of security is a high level of security, but not a guarantee, that an audit performed in accordance with international standards for auditing and the additional requirements applicable in Denmark will always uncover material misstatements when they exist. Misstatements may occur as a result of fraud or error and may be considered material if they can be reasonably expected to have an impact, either individually or collectively, on the economic decisions based on the statements made by the users of the financial statements. 3
The Independent Auditor s Report With regards to an audit performed in accordance with international standards for auditing and the additional requirements applicable in Denmark, we perform professional assessments and maintain professional scepticism throughout the audit. In addition to this: We identify and assess the risk of material misstatements in the financial statements, whether due to fraud or error, design and perform audit procedures in response to these risks and obtain sufficient and appropriate audit evidence to form a basis for our conclusion. The risk of failing to detect material misstatements due to fraud is higher than for material misstatements due to error, as fraud may include conspiracy, document falsification, deliberate omission, misdirection or disregard for internal controls. We obtain an understanding of the internal controls relevant to the audit in order to be able to design audit procedures that are appropriate to the circumstances but not to be able to express a conclusion on the effectiveness of the Group and company s internal controls. We assess whether the accounting policies applied by the management are appropriate and whether the accounting estimates and related information prepared by management are reasonable. We conclude whether the management s preparation of the financial statements based on the going concern principle is appropriate and, based on the audit evidence obtained, whether there is significant uncertainty related to events or conditions that may create substantial doubt as to the Group and company s ability to continue operating. If we conclude that there is a significant uncertainty, we must highlight the details of this in our auditor s report for the financial statements or, if such information is not sufficient, modify our conclusion. Our conclusion is based on the audit evidence obtained up until the date of our auditor s report. Future events or circumstances may give rise to the Group and company no longer being able to continue operations. We assess the overall presentation, structure and content of the financial statements, including the information in the notes, as well as whether the financial statements reflect the underlying transactions and events in such a way as to present a true and fair view. We obtain sufficient appropriate audit evidence for the financial information of the companies or business activities of the Group in order to express a conclusion on the financial statements. We are responsible for managing, supervising and performing the audit of the Group. We are solely responsible for the conclusion of our audit. We communicate with senior management about e.g. the planned extent and timing of the audit, as well as any significant observations related to the audit, such as any significant deficiencies in internal controls that we identify during the audit. Statement on the management s review The management is responsible for the management s review. Our conclusion on the financial statements does not include the management s review and we do not express any kind of conclusion on the management s review. As part of our audit of the financial statements, it is our responsibility to read the management s review and to consider whether the management s review is materially inconsistent with the financial statements or the knowledge we have obtained through the audit or whether it otherwise appears to contain material misstatements. It is also our responsibility to consider whether the management s review contains information required in accordance with the Danish Financial Statements Act. 4
The Independent Auditor s Report Based on the work performed, it is our opinion that the management s review is consistent with the financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We have not found any material misstatements in the management s review. Aarhus, on this date 22. March 2018 ERNST & YOUNG Certified audit company CVR No. 30 70 02 28CVR-nr. 30 70 02 28 Jes Lauritzen State-authorised Public Accountant MNE no.: mne10121 Kim R. Mortensen State-authorised Public Accountant MNE no.: mne18513 5
Management s review Information about the company Name Address, postcode, city CVR number Established Municipality of residence Financial year Telephone Fax Parent company Largest and smallest group of which the company is a part: Subsidiaries Board of Directors Executive Board Auditor BB Electronics A/S Ane Staunings Vej 21, 8700 Horsens, Denmark 21 66 25 34 21 December 1998 Horsens 1. January 31. December +45 76 25 10 00 +45 76 25 10 10 BB Electronics Holding ApS Ane Staunings Vej 21 8700 Horsens, Denmark CVR No. 37 40 70 97 BB Electronics Holding ApS Ane Staunings Vej 21 8700 Horsens, Denmark CVR No. 37 40 70 97 China: BB Electronics (Suzhou) Co. Ltd. Poland: BB Electronics Poland SP Z.o.o. Sven Ruder, Chair Ole Steen Andersen, Vice Chair Per Thrane Folmer Rud Hansen Casper Lykke Pedersen Svend Lindbjerg Gert Højgaard Pedersen Malene Braskhøj Bust Pihl Managing Director Carsten Christensen Ernst & Young Certified Accountants Værkmestergade 25, 8000 Aarhus C, Denmark, CVR No. 30700228. 6
Management s review Group structure BB Electronics Holding ApS 100% BB Electronics A/S 100% 100% BB Electronics (Suzhou) Co. Ltd. BB Electronics Poland SP Z.o.o. 7
Management s review Primary figures and key performance indicators for the Group thousands of DKK 2017 2016 2015 2014 2013 Primary figures Net sales 460,396 400,338 422,688 365,113 425,042 EBITDA before special items 25,168 25,702 26,224 16,470 9,256 Special items -1,012 0-2,413-4,814-5,733 EBITDA 24,156 25,702 23,811 11,656 3,523 Operating profit 17,089 18,431 15,480 1,781-8,793 Profit from financial items -114-2,149-5,451-5,884-7,249 Profit or loss for the year 20,290 14,957 7,337-5,627-15,851 Fixed assets 16,116 16,417 16,282 20,203 23,110 Current assets 235,773 213,134 202,314 188,296 187,048 Total assets (balance sheet total) 251,889 229,551 218,596 208,499 210,158 Share capital 7,634 7,634 7,634 7,634 7,634 Equity 100,856 86,596 43,046 31,032 29,407 Provisions 202 134 561 264 663 Long-term liabilities 22,374 27,735 12,580 25,997 37,593 Current liabilities 128,457 115,086 162,409 151,206 142,495 Cash flows from operating activities 9,463 49,483 22,464 24,945 5,893 Cash flows to investment activities -7,074-7,580-3,961-5,160 296 Of which are invested in tangible fixed assets -4,078-7,024-3,910-3,109-1,699 Cash flows from financing activities -11,129-2,703-19,423-16,050 41,844 Change in cash -8,740 39,200-920 3,735 48,033 Ratios EBITDA margin before special items (%) 5.5 6.4 6.2 4.5 2.2 EBIT margin (%) 3.7 4.7 3.7 0.6-2.0 Return on equity (%) 21.6 23.1 19.8-18.6-42.0 Equity ratio (%) 40.0 37.7 19.7 14.9 14.0 Average number of employees 484 452 488 515 614 Key ratios are calculated as follows: EBITDA margin before special items: EBIT margin: Return on equity: Equity ratio: EBITDA before special items x 100/Net sales EBIT x 100/Net sales Profit or loss after tax x 100/Average equity Closing equity x 100/Closing total assets 8
Report The Group s activities consist of development, production and sales of electronics and EMS services. Production takes place in BB Electronics A/S in Denmark and in the Chinese subsidiary, BB Electronics (Suzhou) Co. Ltd. Financial development - Group The total sales for 2017 was DKK 460 million, which is an increase of 15 % compared to 2016 (DKK 400 million). The growth was driven by both existing and new customers. The sales growth comes from all 3 customer segments. 460 (15 % growth) million DKK in turnover In 2017, the Group realised a total earnings (EBITDA) before special items of DKK 25 million (2016: DKK 26 million) and a profit after tax of DKK 20 million (2016: DKK 15 million). The slightly lower EBITDA before special items compared to last year is primarily due to the negative exchange rate development, price pressure from customers and investments in future growth (including bringing new customers to full year impact in 2018). Profit after tax was positively affected by DKK 4 million from previously unrecognised activities not activating tax assets. Our lower EBITDA level was under budget and considered unsatisfactory, despite the 15 % sales growth. The balance sheet total for the group at the end of the financial year was DKK 252 million compared with DKK 230 million the previous year. The increase is due to increased working capital in connection with the increased activity, and that recognising DKK 4 million from earlier did not activate tax assets. Financing Cash flows from operating activities in 2017 amounted to DKK 9 million (2016: DKK 49 million), which was under budget, but still considered satisfactory due to the high growth. 9 million DKK in positive cash flows from operating activities The total investment cost was DKK 7 million (2016: DKK 8 million). As of 31 December 2017, the net interest-bearing debt is DKK 4 million, while 2016 ended with DKK 0 million. The current capital structure provides the flexibility required to fully support the future strategy of the company. Investments As part of the growth strategy, over the course of the year the company has established a company in Poland that currently only contains administrative activities. Dividends The Board proposes that no dividends be paid for the financial year 2017. Recognition and measurement uncertainties No recognition and measurement uncertainties have been found in the annual report. Anomalies Costs of DKK 1 million have been incurred for the establishment of a new Polish subsidiary in 2017. Events after the completion of the financial statements After the completion of the financial statements and until today s date, no events have occurred that would serve to significantly change the Group s financial position and thereby affect the evaluation of the annual report. Expected development There is expected to be a continued growth in turnover of 10-15 % in 2018 as a result of activities initiated in 2017, as well as new customers. Earnings (EBITDA) are expected to significantly increase with a positive cash flow. We are looking at a challenging commodities market in 2018, which may affect the profit or loss. Financial development - parent company In 2017, there was a total turnover of DKK 356 million (2016: DKK 307 million). Profit after tax was DKK 20 million (2016: DKK 15 million). At the end of the financial year, the balance sheet total amounted to DKK 232 million (2016: DKK 205 million). Equity as of 31 December 2017 amounted to DKK 101 million (2016: DKK 87 million). 9
Risk conditions Business risks The primary business risk faced by the group is the continued ability to deliver good service and produce quality at competitive prices. Management regularly evaluates whether BB Electronics has an ample capital structure, and the Board regularly evaluates whether the capital basis is in keeping with the company s interests and those of its stakeholders. The overall goal is to ensure a capital structure that will support long-term financial growth. Financial risks The parent company centrally manages the Group s financial risks and coordinates the Group s liquidity management, including funding and placement of surplus liquidity. The Group operates with a low risk profile, meaning that currency, interest rate and credit risks only occur on the basis of commercial factors. In addition, customers and inventory that are directly linked to the individual customer are largely guaranteed via external credit insurance. Some large groups are not insured via external credit insurance due to their risk profile. Where deemed appropriate to reduce financial risk, financial instruments in the form of forward contracts and interest rate swaps are included. can be retrieved via: https://www.unglobalcompact.org/participation/rep ort/cop/create-and-submit/active/415058. Whistleblowers Employees at BB Electronics have the ability to contact an external company anonymously if there should be events that they wish to report. There were no such contacts made under this arrangement in 2017. Goals and policies for gender composition of the management BB Electronics has goals for recruitment of women for management positions. BB Electronics wants to make the goal of more women in management quantifiable - both in terms of the process leading to the goal and in relation to the concrete results. Targets have been set for the ratio of female senior managers: The current proportion of females at the senior management level (the Board) is currently 0%, and the target is at least 25% by 5 years from now. There were no actual replacements on the Board in 2017. The proportion of female senior managers in daily management (Executive Board) is currently 25 %, and the target here is also not less than 25 %. The goal is for at least one of each gender to be amongst the final three candidates in the recruitment process. Knowledge resources In 2017, the company maintained its focus on the competitive situation. The staff in China now makes up 80 % of the full-time employees, while the number in Denmark is 20 %. In order to continually be able to deliver and develop competitive products and solutions, it is paramount that the Group be able to retain and develop employees with a high level of education. Therefore, our HR department works with a strategic perspective that in the future will focus on goal-oriented work with attraction, development and job satisfaction amongst the staff. Statutory Declaration of Corporate Social Responsibility The Group joined the UN Global Compact in 2010. The progress report for the year was published and 10
Statement of profit or loss Group Parent company Note thousands of DKK 2017 2016 2017 2016 1 Net sales 460,396 400,338 356,413 307,094 3 Production costs -407,321-351,555-322,754-279,137 Gross profit or loss 53,075 48,783 33,659 27,957 3 Distribution costs -10,502-7,308-7,944-4,895 2,3,4 Administration costs -25,484-23,044-17,052-15,160 Operating profit 17,089 18,431 8,663 7,902 5 Other operating income 28 284 2,630 5,704 5 Other operating costs 0-14 0-13 Profit before financial items 17,117 18,701 11,293 13,593 2.11 Profit from equity investments in subsidiaries after tax 0 0 3,549 4,209 6 Financial income 2,571 812 2,557 176 7 Financial costs -2,685-2,961-1,420-2,741 Profit or loss before tax 17,003 16,552 15,979 15,237 8 Tax on profit or loss for the year 3,287-1,595 4,311-280 Profit or loss for the year 20,290 14,957 20,290 14,957 19 Proposed distribution of net profit 11
Statement of financial position Group Parent company Note thousands of DKK 2017 2016 2017 2016 ASSETS Fixed assets 9 Intangible assets Software 2,949 1,171 2,868 1,042 Other intangible assets 242 303 242 303 3,191 1,474 3,110 1,345 10 Tangible assets Furnishing of rented premises 1,119 753 220 258 Technical plant and machinery 9,173 8,705 6,792 3,418 Other fixtures and fittings 995 316 822 136 Tangible assets under construction 649 3,972 0 3,972 11,936 13,746 7,834 7,784 11 Financial fixed assets Equity investments in subsidiaries 0 0 85,193 86,801 Other receivables 989 1,197 989 1,178 989 1,197 86,182 87,979 Total fixed assets 16,116 16,417 97,126 97,108 Current assets 12 Inventories Raw materials and consumables 78,512 65,980 27,455 19,950 Goods-in-process 8,122 8,987 6,139 5,281 Finished goods and merchandise 5,449 4,656 3,170 1,922 Prepayments for goods 1,487 0 0 0 93,570 79,623 36,764 27,153 Receivables Receivables from sales and services 81,651 74,364 64,687 48,143 Receivables with group enterprises 7,477 615 7,591 615 Other receivables 2,103 2,393 1,279 1,300 8 Deferred tax assets 24,864 20,474 19,700 15,124 Prepayments and accrued income 1,794 1,447 1,299 907 117,889 99,293 94,556 66,089 Cash and cash equivalents 24,314 34,218 3,739 15,059 Total current assets 235,773 213,134 135,059 108,301 TOTAL ASSETS 251,889 229,551 232,185 205,409 12
Statement of financial position Group Parent company Note thousands of DKK 2017 2016 2017 2016 EQUITY AND LIABILITIES Equity 13 Share capital 7,634 7,634 7,634 7,634 Reserve for net revaluation according to the equity method 0 0 34,413 36,452 Retained earnings 93,222 78,962 58,809 42,510 Total equity 100,856 86,596 100,856 86,596 Provisions Other provisions 202 134 0 0 Liabilities 14 Long-term liabilities Credit institutions 20,777 27,702 20,777 27,702 Lease debt 526 33 526 33 Other long-term debt 1,071 0 1,071 0 22,374 27,735 22,374 27,735 Current liabilities Short-term part of long-term liabilities 8,174 6,966 8,174 6,966 Trade creditors and other accounts payable 87,206 82,904 29,929 25,424 Prepayments from customers 9,205 5,856 8,809 5,781 Corporate tax 812 813 0 55 Payables to group enterprises 0 0 50,287 42,975 Other payables 23,061 18,547 11,756 9,877 128,458 115,086 108,955 91,078 Total liabilities 150,831 142,821 131,329 118,813 TOTAL EQUITY AND LIABILITIES 251,889 229,551 232,185 205,409 15 Contingent assets and collateral security 16 Operational leasing and rental agreements 17 Related parties 18 Currency and interest rate risks and use of derived financial instruments Accounting policies used, pages 26-31 13
Statement of movements in equity Note thousands of DKK Share capital Retained earnings Group Proposed dividends Total equity Equity 1. January 2016 7,634 35,412 0 43,046 Extraordinary dividends 0-4,500 4,500 0 Dividends paid 0 0-4,500-4,500 Capital injection 0 35,613 0 35,613 Value adjustments of security instruments after tax - 477 0 477 Exchange rate adjustments - -2,997 0-2,997 Profit or loss for the year - 14,957 0 14,957 Equity 1. January 2017 7,634 78,962 0 86,596 Value adjustments of security instruments after tax 0-442 0-442 Exchange rate adjustments of foreign companies 0-5,588 0-5,588 Profit or loss for the year 0 20,290 0 20,290 Equity 31. December 2017 7,634 93,222 0 100,856 Note thousands of DKK Share capital Reserve for net revaluation Parent company Retained earnings Proposed dividends Total equity Equity 1. January 2016 7,634 35,240 172 0 43,046 Extraordinary dividends 0 0-4,500 4,500 0 Dividends paid 0 0 0-4,500-4,500 Capital injection 0 0 35,613 0 35,613 Value adjustments of security instruments after tax 0 0 477 0 477 Exchange adjustment for subsidiary 0-2,997 0 0-2,997 19 Profit or loss for the year 0 4,209 10,748 0 14,957 Equity 1. January 2017 7,634 36,452 42,510 0 86,596 Value adjustments of security instruments after tax 0 0-442 0-442 Exchange adjustment for subsidiary 0-5,588 0 0-5,588 19 Profit or loss for the year 0 3,549 16,741 0 20,290 Equity 31. December 2017 7,634 34,413 58,809 0 100,856 14
Statement of cash flows Note thousands of DKK 2017 2016 Profit or loss for the year 20,290 14,957 20 Adjustments 3,934 10,417 21 Changes in operating capital -13,374 24,334 Cash flows from operations 10,850 49,708 8 Corporate tax paid -1,387-225 Cash flows from operating activities 9,463 49,483 Purchases of intangible fixed assets -3,232-1,367 Purchases of tangible fixed assets -4,078-7,024 Change in financial fixed assets 208 639 Sales of tangible fixed assets 28 172 Cash flows to investment activities -7,074-7,580 Net change in liabilities -4,153 8,583 Change in receivables/payables to group enterprises -6,862-40,250 Financial income, paid 2,571 812 Financial costs, paid -2,685-2,961 Capital injection 0 35,613 Dividends to shareholders 0-4,500 Cash flows from financing activities -11,129-2,703 Change in cash -8,740 39,200 Liquid assets, 1 January 34,218-4,577 Exchange rate adjustment of initial liquid assets -1,164-405 Liquid assets, 31 December 24,314 34,218 Liquid assets is defined as follows: Cash and cash equivalents 24,314 34,218 Short-term liabilities to credit institutions 0 0 24,314 34,218 The statement of cash flows cannot be directly derived from the other elements of the consolidated financial statements. 15
Notes 1 Net sales Distribution of business areas is as follows: Group Parent company thousands of DKK 2017 2016 2017 2016 Industry 267,112 270,630 232,834 222,047 Professional Telecomm/IT 101,537 62,551 82,853 46,215 Other 91,747 67,157 34,045 36,017 Subsidiary 0 0 6,681 2,815 460,396 400,338 356,413 307,094 Distribution of geographical markets is as follows: Denmark 259,667 166,772 215,941 183,705 Rest of Europe 86,388 145,336 86,388 75,083 North America 14,630 20,622 14,290 15,583 Asia 65,549 42,994 21,249 8,117 Other 34,162 24,614 18,545 24,606 460,396 400,338 356,413 307,094 2 Special items Special items include significant income and expenses of a special nature in relation to revenue-generating operational activities of the Group, such as the cost of extensive structuring of processes and fundamental structural adjustments, as well as any divestment gains or losses related to this that have a significant impact over time. Special items also include other significant amounts of a non-recurring nature that are not considered by management to be part of the Group s primary operations. Profit or loss for the year was influenced by special items in connection with the establishment of a subsidiary in Poland, which differs from what the management considers to be part of the primary operations. Special items, including where they have been factored into the profit and loss statement, are specified below. thousands of DKK 2017 2016 Costs Costs, purchase/establishment of subsidiary -1,012 0 Special items are included in the group accounts on the following lines Administration costs -1,012 0 Profit or loss from special items -1,012 0 Group The parent company recognised administrative expenses of DKK 724 thousand in special items and DKK 288 thousand in equity investments in the subsidiary, a total of DKK 1,012 thousand. 16
Notes 3 Employee information Personnel costs are as follows: Group Parent company thousands of DKK 2017 2016 2017 2016 Salaries and wages 81,092 71,845 44,381 38,334 Pension contributions 7,082 6,808 3,070 2,847 Other social security costs 4,544 4,201 901 766 92,718 82,854 48,352 41,947 and are recognised as follows: Production costs 74,354 68,285 33,724 30,724 Distribution costs 6,460 4,385 6,460 4,385 Administration costs 11,904 10,184 8,168 6,838 92,718 82,854 48,352 41,947 Of which constitutes remuneration to the Board of Directors and Executive Board 2,010 1,852 2,010 1,852 Average number of permanent employees 484 452 94 90 Number of permanent employees as of 31 December 463 444 97 87 Incentive programmes In 2016, a warrant programme was established for the benefit of the management and certain key employees. The programme allows the Board of the parent company to issue up to 12,470 warrants to be allotted over a period of 4 years. The utilisation of warrants entitles the owner to subscribe shares in the parent company at a cost of DKK 2,000 per share with a nominal value of DKK 1. The warrants must be utilised by 1 May 2023, otherwise they will be void. 4 Fee to auditor elected by AGM The BB Electronics A/S Group is included in the consolidated financial statements for the parent company, where the fee to the auditor elected by the AGM is stated. 5 Other operating income and other operating costs Other operating income: Group Parent company thousands of DKK 2017 2016 2017 2016 Profit on sale of fixed assets 28 171 4 97 Other income 0 113 0 0 Income in the form of joint costs invoiced to subsidiary 0 0 2,626 5,607 28 284 2,630 5,704 Other operating costs: Other costs 0 14 0 13 17
Notes Group Parent company thousands of DKK 2017 2016 2017 2016 6 Financial income Exchange rate gains 2,557 624 2,557 0 Other financial income 14 188 0 176 2,571 812 2,557 176 Interest from group enterprises amounts to DKK 0 thousand. (2016: DKK 0 thousand). 7 Financial costs Exchange rate losses 973 905 0 905 Other financial costs 1,712 2,056 1,420 1,836 2,685 2,961 1,420 2,741 Interest from group enterprises amounts to DKK 0 thousand. (2016: DKK 0 thousand). 18
Notes 8 Corporate tax and deferred tax thousands of DKK Corporate tax liability Group Deferred tax assets Tax according to statement of profit or loss Balance, 1 January 2016 0 21,245 - Exchange rate adjustments - -214 - Adjustment of deferred tax for the year - -557 557 Corporate tax paid -225 - - Tax related to income for the year 1,038-1,038 Balance, 31 December 2016 813 20,474 1,595 Balance, 1 January 2017 813 20,474 - Exchange rate adjustments -45-328 - Adjustment of deferred tax for the year - 4,718-4,718 Corporate tax paid -1,387 - - Tax related to income for the year 1,431-1,431 Balance, 31 December 2017 812 24,864-3,287 The deferred tax asset consists of deficit carried forward and accelerated depreciation options. Based on budgets and projections, the management believes that it will be possible to utilise the tax asset. The Group has an additional un-activated tax asset of a 4 million DKK at their disposal. thousands of DKK Corporate tax liability Parent company Deferred tax assets Tax according to statement of profit or loss Balance, 1 January 2016 0 15,124 - Adjustment of deferred tax for the year - - 0 Corporate tax paid -225 - - Tax on income for the year 280-280 Balance, 31 December 2016 55 15,124 280 Balance, 1 January 2017 55 15,124 - Adjustment of deferred tax for the year - 4,576-4,576 Corporate tax paid -320 - - Tax on income for the year 265-265 Balance, 31 December 2017-55 19,700 265 The deferred tax asset consists of deficit carried forward and accelerated depreciation options. Based on budgets and projections, the management believes that it will be possible to utilise the tax asset. The company has an additional un-activated tax asset of a 4 million DKK at their disposal. 19
Notes 9 Intangible fixed assets thousands of DKK Software Group Other intangible assets Cost 1. January 2017 25,955 303 26,258 Exchange rate adjustments -37 0-37 Beginning of the year 3,232 0 3,232 End of the year -4,445 0-4,445 Cost 31. December 2017 24,705 303 25,008 Depreciation 1. January 2017-24,784 0-24,784 Exchange rate adjustments 30 0 30 Depreciation for the year -1,447-61 -1,508 Reversals of depreciation by the end of the year 4,445 0 4,445 Depreciation 31. December 2017-21,756-61 -21,817 Carrying amount 31. December 2017 2,949 242 3,191 Amortised over 3-5 years 5 years Total thousands of DKK Software Parent company Other intangible assets Cost 1. January 2017 25,358 303 25,661 Beginning of the year 3,212 0 3,212 End of the year -4,445 0-4,445 Cost 31. December 2017 24,125 303 24,428 Depreciation 1. January 2017-24,316 0-24,316 Depreciation for the year -1,386-61 -1,447 Reversals of depreciation by the end of the year 4,445 0 4,445 Depreciation 31. December 2017-21,257-61 -21,318 Carrying amount 31. December 2017 2,868 242 3,110 Amortised over 3-5 years 5 years Total 20
Notes 10 Tangible fixed assets Group thousands of DKK Furnishing of rented premises Technical plant and machinery Other fixtures and fittings Tangible assets under construction Cost 1. January 2017 24,208 129,098 28,256 3,972 185,534 Exchange rate adjustments -665-3,429-475 -15-4,584 Beginning of the year/transfer 732 5,738 916-3,308 4,078 End of the year -71-5,296-10,448 0-15,815 Cost 31. December 2017 24,204 126,111 18,249 649 169,213 Depreciation 1. January 2017-23,455-120,393-27,940 0-171,788 Exchange rate adjustments 625 3,167 463 0 4,255 Depreciation for the year -326-5,008-225 0-5,559 Reversals of depreciation at the end of the year 71 5,296 10,448 0 15,815 Depreciation 31. December 2017-23,085-116,938-17,254 0-157,277 Carrying amount 31. December 2017 1,119 9,173 995 649 11,936 Tangible assets include financial leasing assets with a total carrying amount of 0 0 774 0 774 Amortised over 5 years 5-8 years 3-8 years Total thousands of DKK Furnishing of rented premises Technical plant and machinery Parent company Other fixtures and fittings Tangible assets under construction Cost 1. January 2017 13,495 72,809 19,946 3,972 110,222 Beginning of the year/transfer 74 5,276 763-3,972 2,141 End of the year -71-5,279-8,956 0-14,306 Cost 31. December 2017 13,498 72,806 11,753 0 98,057 Depreciation 1. January 2017-13,237-69,391-19,810 0-102,438 Depreciation for the year -112-1,902-77 0-2091. 0 Reversals of depreciation at the end of the year 71 5,279 8,956 0 14,306 Depreciation 31. December 2017-13,278-66,014-10,931 0-90,223 Carrying amount 31. December 2017 220 6,792 822 0 7,834 Tangible assets include financial leasing assets with a total carrying amount of 0 0 774 0 774 Amortised over 5 years 5-8 years 3-8 years Total 21
Notes 11 Financial fixed assets thousands of DKK Group Other receivables Cost 1. January 2017 1,197 Exchange rate adjustments 1 Beginning of the year 0 End of the year -209 Cost 31. December 2017 989 Carrying amount 31. December 2017 989 thousands of DKK Parent company Equity investments in subsidiaries Other receivables Cost 1. January 2017 35,049 1,178 End of the year 8-189 Cost 31. December 2017 35,057 989 Revaluation 1. January 2017 51,752 0 Profit or loss for the year after tax 3,549 0 Exchange rate adjustments -5,588 0 Other 423 0 Revaluation 31. December 2017 50,136 0 Carrying amount 31. December 2017 85,193 989 Equity investments in subsidiaries are specified as follows: Principal place of business Share capital Vote and ownership share CNY 45,634 BB Electronics (Suzhou) Co. Ltd. China thousand 100% BB Electronics Poland SP Z.o.o. Poland PLN 5 thousand 100% 12 Inventories A significant proportion of inventories is customer specific, procured in relation to agreements for which customers are liable. 13 Authorised share capital As of 31 December 2017, equity consisted of 76,340 shares at DKK 100. Share capital has been unchanged for the past 5 years. 22
Notes 14 Long-term liabilities Payments due within 1 year are recognised under current liabilities. As of 31 December 2017, long-term liabilities amounted to DKK 22,374 thousand (2016: DKK 27,735 thousand). The long-term liabilities mature within 5 years after the reporting date. 15 Contingent liabilities and collateral Transport to banks in BB Electronics A/S insurance coverage of receivables from sales of goods and services. A financial institution has provided a customer with a guarantee of DKK 416 thousand to expire in 2019. A company security for DKK 60,000 thousand has been created as security for payables to credit institutions. BB Electronics A/S forms a tax group with the parent company and as of 13 February 2016 is jointly liable with the parent company for Danish corporate tax within the tax group. The known net liabilities of the tax group companies to the Danish Tax and Customs Administration are shown in the parent company s financial statements (BB Electronics Holding ApS, CVR No. 37 40 70 97). Any later corrections of tax group income may result in a higher tax group liability. 16 Operational leasing and rental agreements Group In addition to financial leases, the company has acquired operational leasing liabilities with payments in the noncancellation period totalling DKK 1,379 thousand (2016: DKK 929 thousand). The leasing contracts have noncancellation periods of up to 36 months. The rental agreement in Denmark has a 12 month notice. The annual rent during the non-cancellation period amounts to DKK 1,421 thousand (2016: DKK 1,379 thousand). The non-cancellation period for the rental agreement in China ends on 30 September 2019. The total rent during the non-cancellation period amounts to DKK 3,188 thousand (2016: DKK 5,335 thousand). Parent company In addition to financial leasing contracts, the company has acquired operational leasing obligations with payments in the non-cancellation period totalling DKK 1,379 thousand (2016: DKK 929 thousand). The leasing contracts have non-cancellation periods of up to 36 months. The rental contract is not subject to cancellation until 1 January 2019, after which it can be terminated with 12 months notice. The annual rent is DKK 1,421 thousand (2016: DKK 1,379 thousand). 23
Notes 17 Related parties BB Electronics A/S related parties include the following: Controlling interest Background Transactions BB Electronics Holding ApS Principal shareholder Receivables, DKK 7,479 thousand Ane Staunings Vej 21 8700 Horsens, Denmark BB Electronics (Suzhou) Co. Ltd. China Subsidiary Sale of goods and services: Product sales, DKK 6,681 thousand IT service, DKK 2,626 thousand Product purchases: Product purchases, DKK 178,604 thousand Payables, DKK 42,808 thousand BB Electronics Poland SP Z.o.o. Subsidiary Receivables, DKK 535 thousand Ownership The following shareholder is listed in the list of owners as holding 100% of the share capital: BB Electronics Holding ApS Ane Staunings Vej 21 8700 Horsens, Denmark 18 Currency and interest rate risks and use of derived financial instruments The group uses hedging instruments such as forward contracts and interest rate/currency swaps as part of the hedging of recognised and unrecognised transactions. 2017 There are no financial contracts to hedge currency translation exposure in the statement of financial position as of 31 December 2017. As of 31 December 2017, the group entered into the following forward contracts for the hedging of product purchases: Currency Contract value Market value thousands thousands of USD of DKK EUR/USD 593 1 As of 31 December 2017, the market value of forward contracts is included under other receivables and directly in equity. The company hedges interest risk using interest rate swaps, whereby variable interest payments are converted to fixed interest payments. Interest rate swaps Calculation principal Value adjustments recognised in equity Fair value Residual maturity 24
thousands of DKK 21,155-154 -154 4 years 25
Notes 18 Currency and interest risks and use of derived financial instruments (continued) 2016 The group uses hedging instruments such as forward contracts and interest rate/currency swaps as part of the hedging of recognised and unrecognised transactions. There are no financial contracts to hedge currency translation exposure in the balance sheet as of 31 December 2016. As of 31 December 2016, the group entered into the following forward contracts for the hedging of purchases: Currency Contract value Market value thousands thousands of USD of DKK EUR/USD 677 288 As of 31 December 2016, the market value of forward contracts are included under other receivables and directly in equity. thousands of DKK 2017 2016 19 Distribution of net profit Reserve for net revaluations 3,549 4,209 Retained earnings 16,741 10,748 20,290 14,957 20 Statement of cash flows - adjustments Depreciation and amortisation on intangible and tangible fixed assets 7,067 7,271 Profit on sale of fixed assets -28-171 Financial income -2,571-812 Financial costs 2,685 2,961 Tax on profit or loss for the year -3,287 1,595 Changes in provisions 68-427 3,934 10,417 21 Statement of cash flows - changes in working capital Change in receivables etc. -7,632 10,134 Change in inventories -13,947 1,213 Change in suppliers and other liabilities etc. 12,012 15,020 Exchange rate adjustments -3,807-2,033-13,374 24,334 26
Accounting policies used The financial statements and consolidated financial statements BB Electronics A/S for 2017 have been prepared in accordance with the Danish Financial Statement Act regarding a large Class C company. The financial statements have been prepared according to the same accounting policies as last year. Some accounting items have been reclassified. Key ratios have been adapted. Group accounts The consolidated financial statements include the parent company, BB Electronics A/S and subsidiaries in which the parent - directly or indirectly - owns the majority of voting rights or in which the parent company via share ownership or otherwise holds a controlling interest. The consolidated financial statements are presented as a consolidation of the audited financial statements of the parent company and subsidiaries, all of which are prepared in accordance with the accounting policies of the BB Electronics Group. The consolidation eliminates incomes and costs internal to the group, internal balances and dividends, and realised and unrealised profits and losses arising from transactions between the consolidated companies. The equity investments held by the parent company in consolidated subsidiaries are netted against the share of the parent company in the carrying amount of the subsidiaries as recorded at the time of establishment of the group relationship. Conversion of foreign currencies Foreign currency transactions throughout the year have been converted to the rate in force on the transaction date. Gains and losses arising between rates on transaction and payment days are included in the profit and loss account under financial items. Receivables, liabilities and other monetary items in foreign currencies are converted to the rate on the reporting date. The exchange rate difference between the reporting date and transaction date is included in the statement of profit or loss under financial items. The Group s foreign subsidiaries are independent units. The statements of profit or loss are converted to an average exchange rate, while items on the statement of financial position are converted to the rate on the reporting date. Exchange rate adjustments arising from conversion of subsidiaries equity at the opening of the year and exchange rate adjustments arising from conversion of the statement of profit or loss from an average conversion rate to the rate on the reporting date are entered directly in equity. Derived financial instruments Derived financial instruments are initially recognised in the statement of financial position at cost and subsequently at fair value. Positive and negative fair values of derived financial instruments are entered under other receivables and other liabilities, respectively. Changes in fair value of derived financial instruments classified as and which satisfy the conditions for securing the fair value of an included asset or an included liability are recognised in the statement of profit or loss together with any changes in the fair value of the secured asset or the secured liability. Changes in fair value of derived financial instruments classified as and which satisfy the conditions for securing expected future transactions regarding purchases and sales in foreign currencies are included under other receivables or other liabilities and in equity. If the expected future transaction leads to recognition of assets or liabilities, amounts deferred under equity are transferred from equity and recognised in the cost of the asset or liability. Amounts deferred under equity are transferred to the statement of profit or loss for the period in which the secured item affects the statement of profit or loss. 27
Accounting policies used Segment information Sales are specified in business segments and geographic markets. Information about business segments and geographic markets are based on revenue and risk as well as internal financial management. Statement of profit or loss Net sales Net sales from sale of goods and manufactured products is recognised in the statement of profit or loss, provided delivery and risk transferral to the buyer has taken place before the end of the year. Net sales is recognised exclusive of value added tax, other taxes and sales-related discounts. Production costs Production costs include costs incurred to achieve the net sales for the year, including direct and indirect raw materials and consumables, salaries and wages, rents and leasing, and depreciation on production plants. Distribution costs Costs recognised under distribution costs include costs related to distribution of goods sold throughout the year and any sales campaigns etc. This includes costs related to sales staff, advertising and exhibition costs, and depreciation. Other operating income/costs Other operating income and costs include accounting items of a secondary nature in relation to the main activities of the company, such as profits and losses in regard to sales of intangible and tangible fixed assets. Profit or loss from equity investments in subsidiaries and associated companies The parent company s statement of profit or loss is recognised in the profit after tax of the subsidiary after full elimination of internal profit/loss. Financial entries Financial income and costs include interest income and costs, realised and unrealised exchange gains and losses regarding obligations and transactions in foreign currencies, amortisation of financial assets and obligations, and increases and compensations under the tax on account scheme etc. Financial income and costs are recognised as the amounts concerning the financial year. Tax on profit or loss for the year BB Electronics A/S is covered by the Danish rules for compulsory joint taxation of the parent company. Subsidiaries are included in the joint taxation from the time they are included in the group accounts until the time when they are excluded from the consolidation. The parent company is the management company for the joint taxation and consequently settles all payments of corporation tax with the tax authorities. The current Danish corporate tax is allocated by settlement of joint taxation contributions between the jointly taxed companies in proportion to their taxable income. In connection with this, companies with tax deficits receive joint tax contributions from companies that have been able to use these deficits for the reduction of their own taxable profits. 28
Accounting policies used The tax for the year consists of the current corporate tax and changes in deferred tax for the year - including as a result of changes in the tax rate - and is recognised in the statement of profit or loss as the part directly associated with the profit or loss for the year, while tax directly relating can be attributed to items directly in equity. Statement of financial position Intangible fixed assets Software Software is calculated at cost less accumulated depreciation and amortisation. Software is amortised over the estimated useful life, but not more than 5 years. Other intangible assets Other intangible assets include the value of the customer list and are calculated at cost less accumulated depreciation and amortisation. Customer lists are amortised over 5 years. Tangible fixed assets Furnishings of rented premises, technical plant and machinery and other fixtures and fittings are calculated at cost less accumulated depreciation and amortisation. The depreciation base is cost less expected residual value at end of useful life. Cost includes purchase price and costs directly related to the purchase up until the time when the asset is ready to be put into use. For proprietary assets, the cost includes cost of materials, components, subcontractors, direct wages and indirect production costs. Linear depreciation is performed on the basis of the following evaluation of the expected useful life of the asset: Furnishing of rented premises 5 years Technical plant and machinery 5-8 years Other fixtures and fittings 3 years The depreciation base is calculated based on the asset s residual value at the end of its useful life less any writedowns. The depreciation period and the residual value is determined on the date of acquisition and reassessed annually. The depreciation period ends if the residual value exceeds the carrying amount. The effect of the depreciation is recognised as a change in accounting estimates if there are changes in the amortisation period or residual value. Depreciation is recognised in the profit and loss statement under production, distribution and administrative costs. Leasing contracts Leasing contracts related to assets, where the company holds all material risk and advantage in connection with ownership (financial leasing), are calculated through initial recognition in the statement of financial position at the lower of fair value and the present value of future lease payments. The lease s internal interest rate or the alternative borrowing rate, such as the discount factor, is used when calculating the present value. Financial leased assets are hereinafter treated the same as the company s other assets. 29
Accounting policies used The capitalised residual leasing liability is recognised in the statement of financial position as a liability and the interest element of the leasing payment is recognised throughout the term of the contract in the statement of profit or loss. All other leasing contracts are classified as operational leases. Services connected with operational leases and other leasing contracts are recognised in the statement of profit or loss over the term of the contract. The company s total liabilities relating to operational leases are included under contingencies etc. Financial fixed assets Equity investments in subsidiaries Equity investments in subsidiaries are recognised in the statement of financial position as the proportional share of the companies net asset value as calculated based on the accounting policies for the parent company while subtracting or adding unrealised profits and losses in the Group. Net revaluation of equity investments in subsidiaries are transferred under equity as reserve for net revaluations using the equity method to the extent the carrying amount exceeds the cost. Impairment of assets The carrying amount of intangible and tangible assets, as well as equity investments in subsidiaries, is assessed annually for indications of impairment other than those expressed by depreciation. If there are indications of impairment, an impairment test of the asset or group of assets is made. Software is written down to the recoverable amount if this is lower than the carrying amount. The higher of net sales price and net asset value is used for the recoverable amount. The net asset value is calculated by the present value of expected net cash flows from an asset or asset group and expected net cash flows from the sale of assets or asset groups at the end of their useful life. Previously calculated impairment losses are reversed if the reasons for impairment are no longer valid. Impairment of goodwill is not reversed. Current assets Inventories Inventories are calculated at cost based on the FIFO principle. Where cost is higher than the fair value less costs to sell, the value is written down. Cost for goods, raw materials and consumables are recognised at purchase price plus delivery costs. Cost for finished goods and goods-in-process include cost for raw materials, consumables, direct salaries and indirect production costs. Indirect production costs include indirect materials and salaries, maintenance of and depreciation on machines and equipment used in production, and factory administration and management costs. The fair value less costs to sell for inventories is calculated as the sales price excluding finishing costs and costs related to achieving sales, and is established with due consideration of merchantability, obsolescence and development in expected sales price. Receivables Receivables are measured at amortised cost and reduced by depreciation for bad debt risk of expected losses according to individual assessment. 30